Bloomberg Report Bets on Bitcoin Price Appreciation as US Bank Regulator Seeks Public Comment on Crypto, Blockchain
Something has to go really wrong for Bitcoin not to appreciate to a point of doubling its current US dollar value ($9,780 as at this writing) by the end of 2020, the June 2020 edition of the Bloomberg Galaxy Crypto Index (BGCI) has suggested.
Safe for “a significant change for the worst”, Bloomberg Intelligence expects the Bitcoin price to continue appreciating as this “unprecedented year of central-bank easing” is accelerating the top cryptocurrency’s maturation “toward a digital version of gold while accentuating oversupply constraints in most of the market.”
“The same forces buoying gold support Bitcoin, yet the supply of the crypto is more constrained,” the report says about the two assets that remain the team’s top candidates to advance in 2020 – and have been “building foundations for further price appreciation” – with added rally fuel from Covid-19. In Bitcoin’s case, they cite maturation, greater depth and plenty more exposure via futures as factors that would help suppress its volatility to tilt toward price appreciation.
The impact of the Covid-19 pandemic has seen major global economies roll out stimulus packages which have been projected to likely devalue fiat currencies due to inflation as interest rates are held at low levels to try to boost economies. Covid-19 may, among other things, spur U.S. Federal Reserve’s digital currency spirit which will be a positive for the crypto ecosystem in terms of adoption.
On June 4, the Office of the Comptroller of the Currency (OCC) said it’s reviewing its regulations around digital bank activities and is seeking public input on how it regulates new technologies and digital banking activities, including cryptocurrencies and blockchain tools.
In its advance notice of proposed rulemaking, the federal bank regulator made the call as technological developments have birthed new banking products and services delivered through innovative channels in response to evolving customer preferences – 49% of Americans now bank on their phones and 85% of their millennials use mobile banking.
Considering the opportunities and risks accompanying these developments, the OCC is now seeking comment on its authority to issue a special purpose national bank charter on several issues related to the financial industry’s evolution. They include knowing:
“What types of activities related to cryptocurrencies or cryptoassets are financial services companies or bank customers engaged? To what extent does customer engagement in crypto-related activities impact banks and the banking industry? What are the barriers or obstacles, if any, to further adoption of crypto-related activities in the banking industry? Are there specific activities that should be addressed in regulatory guidance, including regulations?
“How is distributed ledger technology used, or potentially used, in banking activities (e.g., identity verification, credit underwriting or monitoring, payments processing, trade finance, and records management)? Are there specific matters on this topic that should be clarified in regulatory guidance, including regulations?”
The Bloomberg Intelligence report notes that adoption, by default, is the primary Bitcoin metric, adding that the Bitcoin foundation for price appreciation is firming on a stand-alone basis as against the broader crypto market. From a historical perspective, they suggest that Bitcoin is racing toward $20,000 in 2020 – a block reward halving year – to mirror the 2016 return to its previous peak.
“That was the last time supply was halved, and the third year after a significant peak,” their report states. “Our graphic depicts Bitcoin marking time for a third year following the parabolic 2017 rally. After 2014’s 60% decline, by the end of 2016 the crypto about matched the 2013 peak. Fast forward four years and the second year after the almost 75% decline in 2018, Bitcoin will approach the record high of about $20,000 this year, in our view, if it follows 2016’s trend.”
While the coronavirus pandemic is accelerating Bitcoin’s maturity as against the stock market and crude oil, they believe Bitcoin futures trading on the CME is supportive of the price, as well as the higher level of active addresses recorded in about two years. They also don’t see the lack of a U.S. exchange-traded fund as an issue as the report says Bitcoin on-exchange instruments indicate greater buy-and-hold interest to support prices – pointing at the Grayscale Bitcoin Trust being the largest and taking an increasing amount of supply off the market even as its premium continues to decline.